Property Condition Disclosure Highlights: 3Q 2016

In two of the PCD cases below, the courts examined the disclosure rules governing real estate transactions in their respective states. In a case from Michigan, the court held that the disclosure rules require disclosure only with respect to conditions of the property. In a Florida case, the court concluded that a licensee must abide by statutory disclosure rules even if the language of a contract provision suggests that a licensee has no obligation to make disclosures.

A.         Cases

1.         Ealey v. Benjigates Estates, LLC, No. 327244, 2016 WL 4251209 (Mich. Ct. App. Aug. 11, 2016)

Property condition disclosure rules relate to conditions of the property and do not require disclosure regarding interest rates.

The purchaser claimed that the seller and its representative failed to tell her that the finance charge under the land contract for the property exceeded legal limits. The court held that the purchaser failed to show that the defendants had a duty to disclose any information about the finance charges. Michigan real property disclosure rules impose a duty to disclose conditions of the property, but do not require any disclosure regarding interest rates. Interest rates are not a condition of the property. The appellate court affirmed dismissal of the claims.

2.         Lapinsky v. Cook, No. E2015-00735-COA-R3-CV, 2016 WL 5385849 (Tenn. Ct. App. Sept. 26, 2016)

Licensee was not liable for misrepresentations where homebuyer accepted the house after an inspection and could not have relied upon statements made by the licensee.

Homebuyer sued the sellers and sellers’ representative, claiming that repairs were not made as agreed to in the contract, that defects were hidden, and that the defendants made misrepresentations regarding the septic system. The trial court entered summary judgment for the defendants.

The homebuyer had inspected the home with her husband, a licensed general contractor. Afterwards, she signed a Final Inspection Form indicating her acceptance of the house. Evidence showed that the lack of completed repairs was obvious to the homebuyer and her husband during the inspection as there were missing shingles on the roof and peeling trim. Because the homebuyer was aware (or should have been aware) of the obvious failures but still accepted the property, the court concluded that the homebuyer must not have relied on statements made by the sellers or the licensee about the repairs. There was also no unfair trade practice on behalf of the licensee because the homebuyer never had direct contact with the licensee. The appellate court affirmed summary judgment for the licensee.

3.         Kjellander v. Abbott, No. 1D15-5475, 2016 WL 4992415 (Fla. Dist. Ct. App. Sept. 19, 2016)

Licensee could be liable for undisclosed water and HVAC problems.

The purchasers of a home sued the sellers, sellers’ representative, and purchasers’ home inspector for undisclosed water damage, mold, and problems with the HVAC system. The purchasers alleged that the defendants misrepresented, concealed, or failed to disclose the true condition of the house. The trial court entered summary judgment in favor of the licensee on the basis of a contract provision stating that the purchasers would rely solely on the representations of the sellers and third parties other than the licensee.

The appellate court disagreed with the trial court’s decision. According to the appellate court, the contract provision did not relieve the licensee of his duties. The licensee must still satisfy statutory obligations and duties to clients, including the duty of honesty and fair dealing, the duty to disclose all known facts that materially affect the value of the property, and a duty not to make misleading or fraudulent misrepresentations. The court reversed summary judgment in favor of the licensee.

B.         Statutes/Regulations

No PCD statutes or regulations were retrieved this quarter.

C.         Volume of Materials Retrieved

Property Condition Disclosure issues were identified 7 times in 4 cases (see Table 1). The cases addressed mold and water intrusion, septic system, HVAC, insects, and other issues. No statutes or regulations regarding Property Condition Disclosure were retrieved this quarter.


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State Law Based Changes

Read a summary of this quarter's additions to the State Law Based Changes.